Top 4 Trading Assets This Week - Monday, April 10

In March 2017, employers across the US added 98,000 new jobs. While positive, it falls shy of the 180,000-level forecast by analysts. This also marks the end of a 2-month run of gains for jobs growth in the country. The jobless rate is now at its lowest level in 10 years, and it shifts the focus back to the Fed vis-à-vis interest rate policy. The US unemployment rate also dropped from 4.7% to 4.5%, indicating that the economy is running red hot under full employment conditions. Since the end of 2015, the Fed has hiked interest rates 3 times, and this latest data is likely to tighten the screws on the Fed’s policy of further rate hikes for a while.

The jobs numbers were quickly injected into the political debate with Democrats blaming Trump for disappointing jobs growth and Republicans wanting none of it. This figure represents the slowest jobs growth rate since May 2016. Year on year wage growth decreased from 2.8% to 2.7% accordingly. According to the Atlanta Federal Reserve Bank, it is possible that the US economy shrank from a growth rate of 2.1% in Q4 2016 to a growth rate of 1.2% in Q1 2017. This is the lowest unemployment rate in the US for 10 years, and that bodes well for lesser demands on government for unemployment benefits, but slow jobs growth remains a concern.

Trading opportunity #1 – Dow Jones Weaker on Jobs Growth Figures

Friday’s disappointing jobs figures naturally influenced US bourses. The Dow Jones Industrial Average has been battered by a combination of the US missile strike on Syria when 59 cruise missiles smashed a Syrian runway that was used in a chemical weapons attack against civilians, and by the US jobs report which reflected the addition of just 98,000 new jobs when 180,000 new jobs were expected. The above chart reflects the stagnating performance of the Dow Jones, from having broken through the critical 21,000 level and slowly retreating towards the 20,600 level. If the US orders new strikes against Syria, or if tensions with North Korea worsen, we are likely to see a further weakening of the Dow Jones.

Currently, the Dow Jones is trading at 20,656.10 down 0.03% or 6.85 points. On Friday, the Dow had 22 members down and just 7 members up. This is precisely the reason why the industrial average has been dragged lower for multiple successive sessions. For the year to date, the Dow is still up, +4.52%. However, over the course of 1 year the Dow is a strong performer with a return of 20.60%. As a binary options trader, it’s important to gauge the performance of the biggest stocks on the Dow, and how they can lift or drag down the overall performance of the DJIA. Walmart stores Inc. posted strong gains of 2.06% or $1.47 on Friday, but it was insufficient to counter the 22 falling stocks.

Trading opportunity #2 – Walmart is looking bullish

Walmart Stores (WMT) stock is currently trading around $72.90 per share, well above its 50-day moving average of $69.44 per share and its 200-day moving average of $69.44 per share. Walmart stock gained 2.06% or $1.47 by the close of trade on Friday, 7 April 2017. The stock has a 1 year return of 10.22% and a year to date return of 5.47%. Walmart Stores Inc. stock has a 52-week high of $75.19 per share, and it is quickly moving back towards that level after Friday’s gains. Part of the reason there is renewed optimism in stocks like Walmart (besides performance data) is that there is less support for an import tax of 20%, while exempting export revenues from being taxed.

The retail/wholesale sector has been performing sub optimally over the past few years, with growing competition, rising commodity prices, and a strong USD hampering prospects. Retailers like Walmart are dependent on cheaper imports, and any tax would hurt the industry. Another theory is that in the absence of an import tax, the government could allow the USD to strengthen against other currencies thereby making imports a lot cheaper for US companies. However, if the USD does not appreciate adequately, the cost will be borne by retailers and ultimately by consumers. As a binary options trader, there have been several important upgrades of the stock, notably on April 7, 2017 by Telsey Advisory Group from a market perform to and outperform rating. On a scale of 1 (strong buy) to 5 (sell), Walmart stock is rated at 2.7.

Trading opportunity #3 – USD/GBP on the Rise

The USD/GBP pair is trading at 0.8069, up 0.77% over the past 5 trading days. The performance of the greenback has been boosted with rising confidence in the US economy, despite the recent pullback from the March jobs growth figures. The GBP has been weakening against the greenback, and it has been attempting to consolidate near its 2-week lows reached on Friday when the GBP/USD pair was trading at 1.2361, (or when the USD/GBP pair was at 0.808996). The GBP is also being affected by mixed industrial production data. But there is some optimism in store for binary options currency traders looking at the GBP.

For example, the number of net short positions a week ago was 104,000, but by Friday, 7 April 2017 that figure had been reduced to 100,000 net short positions. Another important economic indicator to watch for direction about the USD/GBP pair is the DXY. The DXY is currently at 101.160, down 0.02%, or 0.020. Over the past 1 month, the DXY has moved from 101.70 on the high-end on 14 March to a low of 99.166 on 27 March. It is currently trending higher. This is a clear signal to binary options currency traders that the greenback is bullish.

Trading opportunity #4 – gold set to benefit from inflation

Commodities traders are split when it comes to gold. On the one hand, the geopolitical uncertainty that is rampant presents the perfect opportunity to buy gold. Gold thrives when markets are subject to uncertainty. Equities markets are less bullish than they were when Trump took office, and that negative perspective is certainly prevalent. While gold has not shown any major upside movements, it remains 4.46% higher over the past 30 days. Gold is currently trading at $1,250.06 per ounce, down 0.34% or $4.24. Commodities tend to thrive in times of high inflation. We have seen decades of low-inflation in the US, especially since the 1980s, and it was around that time that the gold price started to plunge.

Now, the central bank has reversed course and has implemented 3 interest rate hikes since the end of 2015. In an era of rising interest rates and tightening monetary policy, we can expect inflation to begin rising. This is when the gold bugs come out to play. It may be a while before we see strong gains in gold, but the long-term projection is certainly bullish. As a binary options trader, aspects like US/Russia relations, US missile strikes on Syria, US and North Korea and other geopolitical issues will move the needle a lot more than the inflationary data. Keep your eyes on the headlines, and look out for the zingers – they will affect the gold price a lot.